Militarty Pay Tax for 100% VA disability

Forum|Forum|6 years ago
February 15, 2020
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I am a retired service member with a 100% VA disability as of March 2019. My VA disability pay is tax deductible. Is my military retirement pay also fully tax deductible?

DanaB27

No, your military retirement is taxable on your federal tax return, only the VA payments are non-taxable. You will receive a 1099-R from DFAS for the military retirement pay. But your military retirement might be non-taxable on your state tax return depending on your state. Please see State Tax Information for Military Members and Retirees for an overview.

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arekelly925

I have the same question and was recently shown in Pub 525 if you receive disability pay from VA your military retirement should not be taxed at the standard rate. So I am seeking clarity.

Example a 70% VA disability rating would only be taxed 30% of the retirement pay. We need to submit our award letter with the effective date of our rating and mail it into the IRS with our return. The publication also indicates its retroactive 3 years. So I am currently wanting to submit an amendment because I was taxed by the state of VA since 2010 but understand I can file for 16- current and I am 100% and in receipt of a military check.

Pls shed more insight if I am misreading this information.

DanaB27

Yes, if your VA disability rating was retroactively increased then you should file amendments (1040X) to get a refund. Please see How to amend (change or correct) a return you already filed.

Usually, you receive a 1099-R from DFAS for your military retirement and the amount on this 1099-R is fully taxable.

But you may be eligible to claim a federal tax refund if there has been an increase in your percentage of disability from the Veterans Administration, or you´ve been granted Combat-Related Special Compensation after an award for Concurrent Retirement and Disability. If the change is retroactive then you will have to file an amendment (1040X) to get a refund.

Please see Special Tax Considerations for Veterans for more details.

@arekelly925

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